Timeshare operator Marriott Vacations Worldwide Corp. (VAC, Financial) announced on Monday it is acquiring rival ILG Inc. (ILG, Financial) in a cash-and-stock transaction valued at approximately $4.7 billion, creating the largest luxury brand for timeshare vacation resorts.
According to the terms of the deal, ILG shareholders will receive $14.75 in cash and 0.165 shares of Marriott Vacations per share of the Miami-based company. The price reflects a 13% premium to the two companies’ closing prices on Friday. Upon completion, ILG shareholders will own about 43% of the company.
"This transaction will combine two of the premier global vacation ownership companies to create a more diversified company with significantly enhanced marketing potential and scale to drive sales growth and value for both MVW and ILG shareholders," Marriott Vacations Worldwide President and CEO Stephen Weisz said.
The combined company will have $2.9 billion in revenue, own more than 100 vacation properties around the world with approximately 650,000 owners and will be the global licensee of seven upscale and luxury vacation brands under the Marriott, Ritz-Carlton, Sheraton, Westin, St. Regis and Hyatt names. It will also have access to the loyalty programs of Marriott International Inc. (MAR, Financial) and Hyatt Hotels Corp. (H, Financial).
"ILG shares our dedication to customers and commitment to creating an unparalleled vacation experience for our Owners,” Weisz said. “Together, I am confident that we will be better positioned to fulfill the dreams of Owners, Members and guests around the world by providing them with memories that will last a lifetime."
Bloomberg reported ILG has been under pressure from activist investment firm FrontFour Capital Group to sell since last year. The firm is concerned with the board’s performance and listed several other grievances in a recent letter.
Craig Nash, chairman, president and CEO of ILG, said the deal provides shareholders with “immediate and compelling cash value” and the opportunity to “meaningfully participate” in the combined company’s long-term growth potential.
"The strategic rationale for this transaction is clear. Combining these two highly complementary businesses will create an industry leader with enhanced scale and a broader product portfolio that will have great benefits for our members, owners and guests,” he added.
According to the company, the deal will also be accretive to earnings per share in the first full year after it closes and result in a stronger, more flexible balance sheet to support future growth and value. The company also anticipates generating $75 million in annual savings within two years.
While the combined company’s headquarters will remain in Orlando, it will maintain a significant presence in Miami. The board will be expanded from eight members to 10 in order to include two representatives of ILG’s board.
The deal is expected to close later this year.
Following the announcement, shares of Marriott Vacations fell while ILG’s stock price rose. With a market cap of $3.25 billion, Marriott Vacations was down 9.45% on Monday morning at $121.86. ILG was up nearly 5% at $34.33 with a market cap of $4.21 billion.
GuruFocus estimates Marriott Vacations has lost 10% year to date, while ILG has gained 18%.
Disclosure: No positions.
